SHANGHAI, Jan 6 (Reuters) – Tesla ( TSLA.O ) cut car prices in China for the second time in less than three months on Friday, sparking a price war amid a darkening demand outlook in the world’s biggest auto market.
The latest cut, along with a reduction in October as well as various incentives amounting to as much as 1[ads1]0,000 yuan extended to Chinese buyers over the past three months, amounts to a 13% to 24% reduction in Tesla’s prices from September, according to Reuters calculations .
On Friday, the US electric vehicle (EV) maker cut prices for all versions of its Model 3 and Model Y cars in China by between 6% and 13.5%, according to Reuters calculations based on prices displayed on its website. The starting price of the Model 3, for example, was cut to 229,900 yuan ($33,427) from 265,900 yuan.
“Tesla’s price adjustments are supported by countless technical innovations,” Grace Tao, Tesla’s vice president of external communications in China, wrote on her Weibo social media account on Friday. “[They] respond to the government’s call to promote economic development and encourage consumption.”
The move comes after December deliveries of Tesla’s China-made cars hit a five-month low, and also just days after Beijing ended a subsidy program that helped build the world’s biggest electric car market. Softer demand has forced Tesla and its competitors to absorb the brunt of this decision.
China Merchants Bank International (CMBI), which warned in July that China’s electric car sector was heading for a price war, said Tesla’s price cut confirmed its prediction, saying the US firm may need to do more, especially as competition with its Chinese rivals intensifies. .
The Model 3 and Y have been the only models Tesla delivers in China, although on Friday it announced prices for the Model S and Model X in China.
“Tesla needs to cut prices further and expand its sales network in China’s lower cities among aging models,” CMBI analyst Shi Ji said.
“We expect new EV production capacity in China to outpace new demand in 2023, and Tesla Shanghai’s capacity utilization could drop to about or even below 80% this year if the Berlin factory ramps up.”
BYD ( 002594.SZ ), which has a much wider range of offerings that include both plug-in and pure electric vehicles, saw retail sales in China double in December while Tesla’s fell 42%, according to CMBI data.
Tesla did not provide additional comment when contacted by Reuters, and a spokesperson referred only to Tao’s Weibo post.
The automaker’s discounts have brought the starting price of the Model 3 to the same level as BYD’s best-selling Han EV sedan, which retails from 219,800 yuan. The Chinese electric car maker recently raised the prices of its best-selling models after losing government subsidies.
Sales of BYD’s Han series, including the plug-in hybrid versions, were more than double those of the Model 3 in China in its first 11 months, according to the China Passenger Car Association.
China prices of the Model 3 and Model Y cars are now 24% to 32% lower than prices in the United States, Tesla’s biggest market, Reuters calculations showed, partly because of different material and labor costs.
($1 = 6.8775 Chinese Yuan)
Reporting by Zhang Yan and Brenda Goh; Editing by Kim Coghill and Muralikumar Anantharaman
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